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Bartercard plc (BRTR)

Wednesday 07 December, 2005

Bartercard plc

Interim Results

Bartercard plc
07 December 2005
Bartercard plc
Interim Results for the six months ended 30 September 2005
Bartercard PLC is a business to business trade exchange which acts as a
facilitator and marketplace for barter transactions. The company services small
and medium sized business and range up to multinationals.
• Turnover: A$27,811,038
• Profit before tax: A$556,493
• All major subsidiaries performed ahead of forecasts
• 6.700 new members acquired globally
• Trade volume over A$1.25 billion
• Ten new offices opened
Wayne Sharpe, Executive Chairman, commented:
'I believe Bartercard is now in excellent shape to realise its considerable
potential to grow internationally and to generate excellent value for
shareholders.'
Enquiries:
Bartercard PLC
Wayne Sharp, Chief Executive 0870 910 255
College Hill
Richard Pearson 020 7457 2020
Roddy Watt
Chairman's Statement
I am pleased to be able to report upon Bartercard's first interim results as a
listed company. The period contains five months results from the 'shell'
company, Universal Direct Group ('UDG'), into which Bartercard reversed, as well
as six months results from Bartercard. Despite UDG incurring losses in the
period, and the substantial costs of the AIM listing in April, overall your
company still made a profit of A$556,493 on turnover of A$27,811,038.
Bartercard was profitable prior to the reverse merger, and UDG has been turned
around and is now profitable following losses last year of $ 6,5 Million (£
2.67 Million) and the subsidiary Platinum Pet Products ('PPP'), has sold all
redundant inventory and is expect to add no losses going forward.
All the Company's major subsidiaries performed ahead of forecasts during the
period and the largest, Bartercard UK and Bartercard Australia, were
consistently profitable, with a new national trading record being set in the UK
in May. In all company owned and licensed operations 6,700 new members were
acquired globally, trade volume was over A$1.25 Billion and ten new offices were
opened taking the total to 130.
Bartercard also took ownership and management control of the licence and
operation in the United Arab Emirates ('UAE'). This will become the 'hub'
office for further expansion in the Middle East and Gulf region. Bartercard
Qatar has commenced operations and a regional support office has also been
established in the UAE. In September, a contract was signed for the Company to
reacquire the majority interest of Bartercard USA. We believe that there is
considerable potential in these territories and expect that there will be a
meaningful contribution from them in the second half of the financial year.
Bartercard International Limited (Bermuda) was behind on its internal budget
during the period, awaiting the finalisation of 3 country licence sales. During
the period, licences were sold to operate the Bartercard system and Master
Franchise in Turkey, South Africa and Saudi Arabia.
Bartercard Thailand won our award of Licensee of the Year 2005.
We will continue with our innovative global marketing initiatives to increase
awareness of the Bartercard name in order to secure new licensees, franchisees
and members worldwide. There are numerous projects planned for the second half
of the financial year.
Shareholders will be aware that there was a dispute over board membership at the
time of the Company's Annual General Meeting ('AGM'). I am pleased to announce
that the dispute was resolved and that a restructuring of the board is now
complete with no further changes envisaged other than the recruitment of at
least one more non executive director
On October 28 the company was placed in an offer period with a proposed
Management Buyout (MBO), however no offer was made or appeared likely to be
forthcoming, so the board has discontinued negotiations.
I believe Bartercard is now in excellent shape to realise its considerable
potential to grow internationally and to generate excellent value for
shareholders.
Wayne Sharpe
Executive Chairman
7 December 2005
BARTERCARD PLC
GROUP INCOME STATEMENT
For the Six Months Ended September 2005
IFRS
6 MONTHS
2006
$A
Total revenue 27,811,038
Total costs and expenses 27,243,968
Profit/(loss) from operations 567,070
Other income/(expense):
Interest income 118,388
Borrowings (188,747)
Rent income 59,782
Total income/(expense) (10,577)
Profit/(loss) before income taxes 556,493
Income tax benefit/(expense) - Other -
Income tax benefit/(expense) - UK -
Net profit/(loss) before minority interest 556,493
Minority interest -
Net profit/(loss) 556,493
Weighted average ordinary shares:
Basic 227,024,829
Diluted 243,276,007
Earnings/(loss) per ordinary share:
Basic/diluted - AUD $0.00
Basic/diluted - GBP £0.00
See accompanying summary of accounting policies and notes to the
financial statements
BARTERCARD INTERNATIONAL LIMITED
GROUP BALANCE SHEETS
As at 30 September 2005 IFRS
6 MONTHS
2006
Assets $A
Total current assets 13,258,400
Total non-current assets 16,274,881
Total assets 29,533,281
Liabilities
Total current liabilities 9,091,650
Total non-current liabilities 3,436,455
Total liabilities 12,528,105
Net Assets 17,005,176
Total shareholders' equity 17,005,176
See accompanying summary of accounting policies and notes to
the financial statements
BARTERCARD PLC
GROUP STATEMENT OF CASH FLOWS
For the Six Months Ended 30 September 2005
IFRS
6 MONTHS
2006
$A
NET CASH FLOWS FROM OPERATING ACTIVITIES (421,016)
NET CASH FLOWS FROM INVESTING ACTIVITIES (1,253,590)
NET CASH FLOWS FROM FINANCING ACTIVITIES 1,446,484
NET DECREASE IN CASH HELD (228,122)
Net effects of exchange rate changes on cash and cash equivalents (281,866)
Add opening cash brought forward 1,484,682
CLOSING CASH CARRIED FORWARD 974,694
BARTERCARD PLC
GROUP STATEMENT OF SHAREHOLDERS' EQUITY
For the Six Months Ended 30 September 2005
Consolidated
Par Value Ordinary Shares Additional Retained Other Total
$A Paid Up Earnings Reserves
Capital
Number of
Ordinary
Shares $A $A $A $A $A
Balance, 31 March 2005 0.02441 216,999,806 5,296,727 7,126,456 (2,058,092) 39,928 10,405,019
Foreign currency translation 925,441 925,441
adjustment
Net income for the year 556,493 556,493
Ordinary shares issued for reverse 0.02441 9,394,900 229,319 2,995,960 3,225,279
take over
Ordinary shares issued during the 0.02441 4,101,666 100,117 1,792,827 1,892,944
year
Balance, 30 September 2005 230,496,372 5,626,163 11,915,243 (1,501,599) 965,369 17,005,176
See accompanying summary of accounting
policies and notes to the financial statements
Notes to the accounts
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
Basis of preparation
The interim report for the six month period to 30 September 2005 of Bartercard
PLC ('the Company' or 'the Group') is unaudited and does not constitute
statutory accounts within the meaning of section 240 of the Companies Act 1985.
It has been prepared under the historical cost convention.
The report has been prepared using accounting policies that comply with
International Accounting Standards ('IAS'), International Financial Reporting
Standards ('IFRS') and interpretations adapted by the International Accounting
Standards Board ('IASB'), excluding the inclusion of comparisons, as per below.
The basis of the accounting policies expected to be adopted in the Company's
full year financial statements are not expected to be significantly different
from those set out in the Group's audited financial statements for the period
ended 31 March 2005.
The results are in accordance with International Financial Reporting Standards
('IFRS') including International Accounting Standards ('IAS')
Following guidance sort from the Alternate Investment Market ('AIM'), no
comparative figures are included, as the Group did not exist prior to the
current reporting period. The change in the nature of the group with Bartercard
operations accounting for 90% of the new group has rendered comparisons
misleading.
The functional currency of the Company is the Australian dollar. The Financial
statements of the Company's subsidiary have been translated to Australian
dollars in accordance with IAS 21 - The Effects of Changes in Foreign Exchange
Rates. The closing and average exchange rates applied for the GBP/AUD used were
2.31947 and 2.48813 respectively.
Accounting for Bartercard Trade Dollar Activities
The Company receives trade dollars for monthly services provided to its
Bartercard Exchange members and as transaction fees for exchanges made by its
members. The Company also expends trade dollars in the acquisition of goods or
services used in its operations. When reasonably determinable, the Company
records these transactions at the fair value of the goods or services received.
Historically, the Company has spent virtually all trade dollars for broker
commissions, advertising, salaries and legal settlements. Because there is no
readily estimable or determinable value for these goods and services, they are
not reflected in the accompanying financial statements. The Company also has the
ability to spend trade dollars with no obligations to the exchange. The Company
has historically spent more trade dollars than it has earned.
As IFRS has no specific standard relating to the treatment of trade (other than
Standing Interpretations Committee Interpretation (SIC) 31 - Revenue - Barter
transactions Involving Advertising Services, which can not be applied to other
situations), the Company has in line with IAS 8 - Accounting Policies, Changes
in Accounting Estimates and Errors and the Norwalk Agreement applied United
States Generally Accepted Accounting Practice (USGAAP) to the treatment of
trade. As such, transactions that originate from the creation of trade dollars
expended for goods or services do not qualify as exchanges under Accounting
Principles Board (APB) 29 - Accounting for Non-monetary Transactions, and,
accordingly are not reflected in the accompanying financial statements.
Transactions that involve the exchange of goods or services for other goods or
services are accounted for in accordance with APB 29 and the interpretations
contained in Emerging Issues Task Force (EITF) 93-11 - Accounting for Barter
transactions Involving Barter Credits, EITF 99-17 - Accounting for Advertising
Barter Transactions and SIC 31. Accordingly, the Company generally records
exchanges at the carrying value of goods or services exchanged which is
typically zero, as the fair values of the goods or services exchanged lack
readily determinable fair values within reasonable limits as the Company has no
history of receiving cash in similar transactions, and therefore the earnings
process has not been completed.
Trade Dollar Activity
As detailed above, trade dollar activity is not reflected in the Group Income
Statement or Group Balance Sheets. During the six months ended 30 September
2005, the Group credited trade dollar revenue of T$7,301,670. Trade dollar
expenditure on operational costs totalled T$8,298,909. Fixed assets purchased
for the period totalled T$223,476.
The values attributed to the trade dollar revenue and expenditure above, are
those that are used for transactional accounting purposes within the Bartercard
Trade Exchange program. The fair value of these trade dollar transactions cannot
be calculated and therefore these transactions are excluded from the operations
of the consolidated entity.
In addition, assets acquired during the period, using trade dollars and the
trade dollar liability at those dates are not recorded in these financial
statements.
The Company does not guarantee the utilization of, or market for, Bartercard
Trade Dollars. In addition, the Company can expend trade dollars in excess of
those credited to the Company's account.
Accounting for Publication and Transaction Fees Received in Bartercard Trade
Dollars
In addition to receiving cash publication and transaction fees, the Company also
receives Bartercard trade dollars from members of the trade exchange in
connection with its services in operating the exchange. These trade dollars are
utilized by the Company for either the acquisition of goods and services that
are then made available for purchase by members of the exchange (enabling the
Company to earn cash transaction fees) or for use by the Company in its
operations.
The Company does not record revenue at the time of earning these trade dollars
because there is no persuasive evidence that the value of the services provided
by the Company exceeds the amount of monetary consideration received. Further,
the Company does not record revenue at the time of receiving the trade dollars
because not all of the Company's performance obligations have been completed.
The Company must continue to successfully operate the exchange in future periods
in order to be able to utilize the trade dollars.
Accordingly, the Company has not recorded transactions denominated in Bartercard
trade dollars in these financial statements.
NOTE 2 - ACQUISITION OF CONTROLLED ENTITY
On 26 April 2005, the shareholders of Bartercard International Limited ('BCIB'),
a company incorporated in Bermuda acquired by means of a reverse take over, a
controlling share of Bartercard PLC ('BCPLC')(formerly trading as Universal
Direct Group PLC). For a 100% holding of BCIB, BCIB shareholders received
216,999,806 shares, representing a voting right of 95.9% in what is now
Bartercard PLC.
The Company has accounted for the transaction per the requirements of IFRS 3 -
Business Combinations. The equity structure of BCPLC has been applied to BCIB's
opening equity and the existing 9,394,900 ordinary shares in BCPLC were valued
at 14p, the price of the Concert Party's general offer made on the 1st April
2005.
For accounting purposes the following table summarizes the estimated fair values
of the assets acquired and the liabilities assumed from Universal Direct Group
at the date of the reverse takeover.
AUD GBP
Cash 699,6110 285,305
Stock 532,350 217,095
Receivables 675,987 275,671
Property, plant and equipment (net) 71,100 28,995
Intangibles - -
Goodwill - -
Total assets acquired 1,979,047 807,066
Payables (1,596,080) (650,890)
Net assets acquired 382,967 156,176
Cost of purchase 3,225,279 1,315,286
Cost of acquisition 1,236,459 504,235
Goodwill recognised 4,078,771 1,663,345
Direct costs incurred in the combination totalled $1,236,459 and covered all
nomad and consulting costs incurred in the process. Since the combination date,
no business units have been disposed of as a result of the combination.
NOTE 3 - SHAREHOLDERS EQUITY
Share equity:
Ordinary Shares, GBP£0.01 ($0.02441) par value;
230,496,372 shares issued and outstanding 5,626,163
Additional paid up capital 11,915,243
Retained earnings (1,501,599)
Other reserves 965,369
Total shareholders' equity 17,005,176
NOTE 4 - PROFIT PER SHARE
Basic and diluted earnings per share are based on the profit for the period of
$556,493, and the following weighted average number of ordinary shares.
Weighted average number of shares:
Basic 227,024,829
Dilutive effect of warrants 16,251,178
Weighted averaged number of shares - Diluted 243,276,007
As part of a loan agreement signed in September 2005, a further 275,000 warrants
are expected to be issued in the coming six month period.
NOTE 5 - SEGMENT OPERATIONS
The Company now operates in three operating segments being trade exchange
operations, the selling of country operating licences and 'Universal' reverse
logistics. The Company views certain expenses, particularly some general and
administration costs, as not belonging to any one reportable segment. As a
result, the Company has aggregated these items into an 'Other' non-segment line,
as permitted by IAS No. 14 'Segment Reporting
2006 Bartercard Bartercard Universal Group Group
Trade Licensing Reverse logistics Other Total
Revenues
External customers 24,218,163 426,175 2,654,340 512,360 27,811,038
EBITDA 2,517,864 (568,912) 138,522 (603,197) 1,484,277
Interest Income 55,491 53,551 1,642 7,704 118,388
Interest expense (155,770) (253) (32,724) - (188,747)
Depreciation and amortisation (733,949) (115,428) (7,736) (312) (857,425)
Segment profit/(loss) 1,683,636 (631,042) 99,704 (595,805) 556,493
Segment assets 16,220,946 5,768,933 1,493,687 6,049,715 29,533,281
Purchase of property, plant and 68,339 27,669 - 3,799 99,807
equipment
Goodwill - - - 4,078,771 4,078,771
Consolidated
2006
Revenues Long Lived assets
$A $A
Australia and New Zealand 19,211,266 11,834,773
Europe 8,087,412 4,436,520
Bermuda 512,360 3,588
Total 27,811,038 16,274,881
NOTE 6 - RECONCILIATION OF CASH FLOW FROM OPERATING NET PROFIT/(LOSS)
2006
OPERATING PROFIT AFTER TAX 556,493
Non cash flows in operating profit
Depreciation/Amortisation on plant and equipment 598,887
Net foreign currencies gain/(losses) (88,308)
Interest income movement (50,626)
Net (profit)/loss on disposal of plant and equipment (148,562)
Increase/decrease in assets and liabilities
Property plant and equipment - (increase)/decrease (134,367)
Intangibles - (increase)/decrease 263,107
Receivables - (increase)/decrease (2,165,429)
Inventories - (increase)/decrease 244,406
Prepayments - (increase)/decrease (167,956)
Creditors and borrowings - increase/(decrease) (56,525)
Provisions - increase/(decrease) 623,731
Other non-current payables - increase(decrease) 104,133
NET CASH FROM OPERATING ACTIVITIES (421,016)
The increase in receivables is due mainly to the timing effects of two major
sales (Sunbury UK and Brisbane North Australia.) Both transactions will
substantially be settled in the second half of the year.
NOTE 7 - DIRECTORS
Directors:
The name of persons who were directors of Bartercard PLC, at any time during the
6 month period are:
Wayne Sharpe (appointed 26 April 2005)
Andrew Federowsky (appointed 26 April 2005)
Murray d'Almeida (re-appointed 26 April 2005)
David Wright
Christian Williams (resigned, 27 October 2005)
Keith Springall (appointed 26 April 2005, resigned 27 October 2005)
Edward Adams (appointed 26 April 2005, resigned 27 October 2005)
As well as being members of the board, the following directors held positions
within the consolidated group as follows:
Wayne Sharpe -Chairman, Bartercard PLC
Andrew Federowsky - Managing Director, Bartercard International Pty Ltd
Keith Springall - Finance Director, Bartercard PLC
David Wright - Chief Executive Officer, Bartercard PLC
Murray d'Almeida - Chairman, Bartercard Australia Pty Ltd
NOTE 8 - RELATED PARTY TRANSACTIONS
On 6th July 2005, Wayne Sharpe, Chairman, and David Wright, Chief Executive
Officer invested £300,000 and £200,000 respectively in new shares in the
company. 3,125,000 ordinary shares in aggregate were issued at a price per
share of 16p.
In addition Wayne Sharpe, Chairman, loaned £100,000 to the company by way of a
debenture.
On 29th July 2005, 976,666 new ordinary shares were allotted fully paid at 30p
per share to Allied Trust Company Limited (in which Edward Adams, a Director, is
a beneficiary) in settlement of a short-term loan of £293,000.
On 30th September 2005 a contract for Sale of Businesses for the Sunbury
Brokerage (United Kingdom) to Molecob Limited , a company of which David Wright
and Keith Springall, directors, are officeholders, was completed with a deposit
being received. The value of the sale, included within the results for the
period was £290,000
On 30th September 2005 a contract for Sale of a new licence for south west
London (United Kingdom) to Molecob Limited , a company of which David Wright and
Keith Springall, directors, are officeholders, was completed with a deposit
being received. The value of the sale, included within the results for the
period was £50,000
Golden Key Company (Aust) Pty Ltd, of which Andrew Federowsky is a Director,
owes a total of $13,695 to the Group, $8,552 owing to Bartercard Australia Pty
Ltd and $5,143 to Bartercard International Pty Ltd (Aust).
A loan of $174,406 was extended to Murray d'Almedia, a director of the company
for outside consultancy work undertaken in relation to a purposed Management Buy
Out of Bartercard Australia Pty Ltd.
During the six month period consulting services totalling $94,487 were performed
by Bartertrade Pty Ltd of which Mr Andrew Federowsky, a director, is an
officeholder. Bartertrade Pty Ltd also received $18,200 in trade dollar
payments. Further, commissions and bonuses totalling $1,811 and trade $413 were
also paid to Bartertrade Pty Ltd.
During the six month period consulting services totalling $26,000 were performed
by Ridgeson Pty Ltd of which Mr Andrew Federowsky, a director, is an
officeholder.
During the six month period consulting services totalling $38,642 were performed
by Mr Christian Williams.
During the six month period consulting services totalling $604,298 were
performed by IGIA of which Mr Wayne Sharpe, a director, is an officeholder.
IGIA also received $11,417 in trade dollar payments.
During the six month period a salary totalling $74,718 was paid to Mr Wayne
Sharpe.
During the six month period a salary totalling $117,480 was paid to Mr Keith
Springall.
Director Fees
During the six month period director fees totalling $10,010 were received by Mr
Andrew Federowsky from Bartercard Australia Pty Ltd, a subsidiary entity within
the Group. Mr Federowsky also received $1,690 in trade dollar payments.
During the six month period director fees totalling $6,500 were received by Mr
Andrew Federowsky from Bartercard International Pty Ltd, a subsidiary entity
within the Group.
During the six month period director fees payable by Bartercard Australia Pty
Ltd, were received by CD Management Pty Ltd of which Mr Murray d'Almeida, a
director, is an officeholder. The amount received totalled $9,100. Bartercard
Australia Pty Ltd is a subsidiary entity within the Group. CD Management also
received $1,536 in trade dollar payments.
NOTE 9 - SIGNIFICANT EVENTS
On 10th May 2005 Bartercard International Limited (Bermuda) signed a heads of
agreement for a new licence for The Republic of South Africa. The company
received a deposit and the full licence is expected to be completed before the
end of March 2006. The value of the licence fee is US$650,000.
On 19th May 2005 Bartercard International Limited (Bermuda) signed a heads of
agreement for a new license for The Republic of Turkey. The company received a
deposit and the full license is expected to be completed before the end of March
2006. The value of the licence fee is US$600,000.
On 22nd May 2005 Bartercard International Limited (Bermuda) signed a heads of
agreement for a new licence for The Kingdom of Saudi Arabia. The company
received a deposit and the full licence is expected to be completed before the
end of March 2006. The value of the licence fee is US$700,000.
The successful reorganisation of the Universal Direct Group continued with the
cash sale of all redundant inventory in the previously loss making subsidiary of
Platinum Pet Products. This has further aided the performance of the former
Universal Direct Group assets, which are now operating at a profit.
On 30th September 2005 a contract for Sale of Businesses for the Brisbane North
Brokerage (Australia) was signed with a deposit being received.
NOTE 10 - SUBSEQUENT EVENTS
A licence for a new territory franchise for the Leicester district was agreed
and a deposit received in November 2005.
On 11th November 2005 the company welcomed Simon Barker BA FCCA onto the Board
as the Group Finance Director.
On 14th November 2005 David Wright relinquished his role as Chief Executive
Officer to concentrate on other business interests. David Wright remains a non
executive Director of Bartercard plc.
On 28th November 2005 Trevor Dietz was announced as Managing Director of the
subsidiary Bartercard Australia Pty Ltd. Former Managing Director David
Johnstone has taken up the role of Chief Operating Officer in Bartercard
International Australia Pty Ltd, also a subsidiary.
On 6th December 2005, the Company was unable to progress discussions with the
MBO team further, and as such, terminated discussions.
The Company has reserved its rights against former directors, Keith Springall,
Edward Adams, Christian Williams and current non-executive director David Wright
in relation to disputes arising from the Annual General Meeting of the Company
held on 19th October 2005.
NOTE 11 - CONTINGENT LIABILITIES
Bartercard International Pty Ltd ('BCI') -v- Bartercard Canada Inc. (trading as
Barter plus Systems Inc), John Michael Caron & Ors
Claim for AU$1.375 million.
Judgment by default obtained 2 September 2005 against the remaining defendant
Mr. Caron including damages at approximately US $3million as well as declaratory
and injunctive relief. Legal costs estimated to be CAN$3-4,000. Discussions
with Canadian lawyers are continuing as to enforcement of court orders.
Bartercard Australia Pty Ltd -v- Frontiers Australia Group
Claim for $110,000
BCA paid Frontiers Australia Group for TV advertising which never occurred. BCA
issued court proceedings against Frontiers Australia Group. Out of court
negotiations currently taking place, offers are being made by both parties.
Australian Tax Office audit of Bartercard Australia Pty Ltd
During the period, the Australian Taxation Office commenced auditing Bartercard
Australia Pty Ltd, a subsidiary of the Company. The audit is part of a normal
series of audits conducted by the ATO on all companies and relates to the areas
of Income Tax, Goods and Services Tax, Fringe Benefits Tax and Research and
Development. The audit covers the tax periods 2001 through to 2004, where
applicable. The subsidiary has been issued an amended assessment in relation to
Fringe Benefits Tax in the amount of $122,801 plus general interest charges.
The Company has not adjusted the financial statements to reflect this amount as
this matter remains the subject of on-going negotiation with the Australian
Taxation Office.
This information is provided by RNS
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